California Governor Gavin Newsom has vetoed a bill that sought to license and regulate crypto. Assembly Bill 2269 was introduced by AssemblyMan Timothy Grayson. However, the bill was subjected to heavy criticism by the crypto community.
The bill, when passed on 30 August, had full majority and received 71 yes votes, zero no votes in California’s Assembly, a day after being approved by the California Senate.
“While the newness of cryptocurrency is part of what makes investing exciting, it also makes it riskier for consumers. Cryptocurrency businesses are not adequately regulated and do not have to follow many of the same rules that apply to everyone else,” AssemblyMan Grayson had earlier stated.
It’s a green signal then?
If Governor Newsom had signed the bill into existence, it would have equated crypto transactions to regular money transactions. This would effectively bring cryptos under the purview of the Money Transmission Act.
Furthermore, the proposed bill would have restricted entities licensed by the state of California from interacting with stablecoins. Especially those that were not issued by banks or licensed by the state Department of Financial Protection and Innovation.
Assessing the Governor’s statement…
In a letter addressed to the members of the California State Assembly, Governor Newsom explained his reasons for vetoing the bill. He clarified that he shared the intent to protect people from financial harm in the face of rising popularity of innovative financial assets. He stated,
“It is premature to lock a licensing structure in statute without considering both this work and forthcoming federal actions. A more flexible approach is needed to ensure regulatory oversight can keep up with rapidly evolving technology and use cases, and is tailored with the proper tools to address trends and mitigate consumer harm.”
Critics of the proposed bill called it the Californian version of New York’s BitLicense. BitLicense is a regulation that was implemented in the state of New York in 2015. At the time it was a landmark cryptocurrency regulation that required businesses to obtain a license to engage crypto-related activities.
However, the regulation received widespread criticism for altering the crypto landscape in the state. Following years of pushback and complaints, state regulators agreed to alter the bill in June 2020. Furthermore, authorities decided to implement a more relaxed regulatory framework to ease the licensing process.